Regular savings accounts provide a secure and reliable way to save and accumulate funds over time. If you choose your bank wisely, these accounts keep your hard-earned money away from harm’s way, usually through deposit insurance schemes. Immune to market fluctuations, they are highly stable and hence, the best bet for risk-averse individuals. You can also expect ease of use, high liquidity, and decent interest earning with a standard savings bank account.
Also known as Basic Savings Bank Deposit Account or BSBDA, zero balance accounts offer virtually the same level of safety, stability, ease of use, and liquidity as any standard account. However, if you dig deeper, the differences become obvious. Let’s have a head-to-head comparison of both to help you make informed decisions.
- Expenses Involved:
Regular bank accounts come with a minimum balance limit, meaning you have to maintain a minimum sum at all times. The moment you fail to comply, penalties trigger into action, which can be up to 6% of the shortfall. On the other hand, a 0 balance account opening can happen without funds. It will stay operational even if you maintain a zero balance. So, the penalties associated with minimum balance requirements are not applicable in zero-balance accounts.
In a regular bank account, you might have to pay for account opening, making transactions, and accessing debit cards, cheque books, and Internet banking facilities. Note, that these charges are subject to the bank. On the contrary, zero-balance accounts either charge nominal fees or offer basic banking services free of charge. Rather, these accounts aim to extend basic banking services to those who otherwise cannot afford a regular bank account.
- Interest Rates:
Interest rates are the prime deciding factor when it comes to choosing a bank account. Even a fraction of the difference in interest rates makes a big difference to your wealth-building efforts in the long term. The regular savings account offers interest rates up to 4.25% annually, subject to the bank and amount of savings. This is a bit higher than what a typical zero-balance account offers. The best interest rate a zero balance account can offer currently is up to 4% provided by Kotak Edge savings account. So, if maximizing interest earnings is a priority for you, a regular savings account would be a better option even though the difference in interest rates is negligible.
- Banking Services:
Regular accounts and zero balance accounts come with more or less same features and services that make banking easy and rewarding. However, you might have to deal with limitations on the number of transactions or withdrawals allowed per month with a zero balance account. That said, some zero-balance accounts like the Edge savings account offer ATM/debit cards, cheque books, and internet and mobile banking facilities at no extra costs. It is always advisable to start with a zero-balance account and upgrade to a regular account when financial standing improves. This will help you to access need-based additional services on your journey to financial success.
- Accessibility:
A standard bank account is relatively inaccessible to low-income groups who cannot maintain a minimum balance or afford account opening and maintenance, and other charges. Also, some individuals may not keep up with the comparatively complex application process and stringent documentation requirements these accounts entail. Conversely, Zero-balance accounts are designed to bridge the gap between banks and the unbanked and underbanked population.
Since zero-balance accounts have financial inclusivity at heart, they are readily accessible to all. A typical 0 balance account opening process is simple, and accomplishable online as well as offline. Just provide your passport-sized photographs, and residence and identity proofs, and you are sorted. Kotak Mahindra Bank even simplifies the KYC process with video-KYC. You can even open a zero-balance account with passport-size photographs and some signatures, provided you fulfil the criteria for a non-KYC zero-balance account.
- Miscellany:
Regular savings accounts have no upper limit on deposits. Contrarily, in a zero-balance account, you cannot deposit more than one lakh INR. If exceeded, the bank will convert it into a regular savings account. Also, regular accounts can support foreign remittances while zero-balance ones cannot.
Conclusion:
When compared to a standard account, a zero-balance bank account fares better on some parameters and lags on others. So, it boils down to your specific needs and financial objectives. If you prioritise interest earning, higher deposit limits, and more banking services and features, a standard bank account makes sense. However, if you are either starting your financial journey or simply wish for a no-frill, easily accessible, and cost-effective account, a zero-balance account could be a comforting option.
Read: Start Your Banking Journey Online with Zero Balance Account Opening
